To dream the impossible dream?

Standards for location and product identification are within reach, and so are the supply chain benefits associated with them

You have read a lot lately about e-standards. Questions always come up about how standard identification of medical devices will help hospital materials managers keep track of the thousands of items they order daily. How can standard identification impact patient care? Can standards improve communications between hospitals and suppliers?

Envisioning an environment of standardized identification requires real imagination. In our real world today, we have grown accustomed to a confusing healthcare business environment, where we focus on the great work we do to harness chaos rather than thinking about conditions to limit it.

One way to imagine a future with standards is to break down the work we do today into smaller pieces and then think about the recurring challenges of each. The materials manager is the broker between the internal world of clinicians, who use products in patient care, and the external world of suppliers, who oversee the manufacturing and distribution of them. Tracking the flow of products and information is different for these two worlds, and currently, no unique product identification links them together.

Inside the hospital
Inside the hospital we worry about having the right product at the right place at the right time. We struggle to track an ever-growing volume of SKUs demanded by clinicians. Some of us get riveted to the magic of automated point-of-use systems close to the bedside. We think by knowing what products were used in exact amounts and on which patients, at exact times, accurate “perfect orders” will float through cyber space to perfectly replenish our cabinets. Some of us get fixated on the “well maintained” item master. This elusive animal is the big catalog, including any product your clinicians could ever want. If you work hard and do everything right, every order will be correct, and when perfect invoices come in, payment flows to happy suppliers!

But let’s get real. Isn’t perfection always a “work in progress?” The truth is, you can’t keep product attribute data current, so you may not know how many items were ordered, since suppliers may change packaging units without telling you. You don’t know if the supplies ordered are what the clinicians really need. Perhaps they already know of a newer product. You worry that some things delivered to the bedside today were recalled by the FDA yesterday (or last month), and you are clueless as to what they are or where they may be. You ordered something yesterday, but it went to another part of the hospital, and it’s easier to reorder it rather than try to find it. You know you can’t answer the patient with an allergic reaction who asks what was used in their care two weeks ago. Do you wince when the CEO rants about “wasteful spending” and “unmanaged inventories?”

Using location and product identification standards will hugely reduce these hassles. The change won’t be immediate, because, like anything else, progress will be by degree. Even thinking about step one makes us nervous, since putting the standardized numbers into information systems seems like a big barrier. But let’s imagine, for the sake of argument, the standard numbers are in place.

Current system hand-offs, from point-of-use systems to ordering software, item master, EDI exchange and accounts payable systems, would all use only one number for each product. Clinicians would know that unique product identification is the key to getting new product in the system. This number would be generated by the supplier, specific to each packaging unit and updated in your system daily. Each ordering location would have a unique number recognizable to all suppliers. For this reason, orders would be clean, packaging would be correct, and ordering locations would be known to all. FDA recalls would use this same product identifier, so you could get daily recall updates. Alarms at locations receiving faulty product for the previous few months would go off and alert clinicians to avoid using them.

Outside the hospital
Let’s talk about our world external to the hospital. Currently we try to manage proliferating medical device SKUs by nailing down exclusive contracts with suppliers selected through negotiation or bidding procedures. We think by identifying spend in large buckets, we can get attention from suppliers so they will reduce prices with the promise of committed volumes. We try to limit our supplier base to rationalize our logistics and information flow to reduce total costs.

Group purchasing organizations help us consolidate volumes beyond the four walls, and distributors manage inventory to keep our holding costs down. Some of us hope when all these organizations work together in perfect harmony, with all interests perfectly aligned to hospital priorities, products will be of the highest quality, at the lowest cost and routinely available. Others of us try to manage large parts of the external supply chain process on our own to reduce the number of players who may be adding costs and uncertainty to the equation.

No matter how we choose to manage our external world today, I would bet all of us spend considerable resources making sure all data files are correctly loaded into various systems in a timely manner. Many systems use their own product identifiers, so mismatch frequently occurs. If we fail to match product files, product information and pricing is guaranteed to be inaccurate, payments are delayed, and credit posting lengthy. Because product usage information is nearly invisible to suppliers, they must guess at needed manufacturing volumes, so overstocking of some items and stock-outs of others is common. This misery leads to unhappy clinicians and is wildly expensive when taken as a whole.
How will unique identifiers change the ground rules for this side of the equation? Again, I ask you to imagine that standard identifiers are in place. The obvious rationalization of file transfer already described as an enhancement to our internal processes will impact the external processes as well.

In addition to this change, the unique product identifier will facilitate a new direct path of information from the bedside to the supplier. This communication will mimic the supply chains of other industries, including fast-moving consumer goods and groceries. For the first time, the demand side of the supply chain will be allowed to really work in healthcare. This change will reduce the guesswork for suppliers and allow negotiations around the products that are really important to clinicians. Maybe your contracting practice will change to focus on selective product lines from more suppliers. When your supply identifiers are linked through the electronic health record to your billing operation and to large research data bases, where varying patient outcomes can be studied relative to product usage, everyone will have more visibility into what products are most beneficial to patients.

Pie in the sky? Maybe so, but what a sad commentary it would be to say we couldn’t work for a better world because we were too distracted by trying to perfect the chaotic practices of today.